Defenses to Enforcement:
When an Agreement Exists but the Law Refuses to Enforce It

Friday should cover contract defenses. This episode is essential because students often stop analysis once they find offer, acceptance, and consideration. But an agreement may exist and still be unenforceable.

The key lesson for Friday is that a student must always ask whether there is a reason not to enforce the agreement even after formation appears valid.

The episode should begin with capacity. Certain persons may lack full contractual capacity, including minors and persons with mental incapacity.

Contracts by minors are usually voidable by the minor, subject to exceptions for necessities. Mental incapacity may make a contract voidable if the person was unable to understand the nature and consequences of the transaction or unable to act reasonably and the other party had reason to know.

Next, let’s move to duress. Duress occurs when a party’s assent is induced by an improper threat that leaves no reasonable alternative.

Physical compulsion can make a contract void. Economic duress may make a contract voidable when one party uses wrongful pressure to force agreement. Mere hard bargaining is not enough. The pressure must be improper.

Undue influence involves unfair persuasion of a party who is vulnerable or under the domination of another, often in relationships of trust or dependence.

Students should learn to look for excessive pressure, weakened capacity, special relationships, isolation, unusual timing, rushed signatures, and lack of independent advice.

Misrepresentation occurs when one party makes a false assertion of fact that induces assent. Fraudulent misrepresentation requires scienter, meaning knowledge of falsity or reckless disregard.

Material misrepresentation may also support avoidance if it would likely induce a reasonable person to agree or did induce this particular party. Students should distinguish fact from opinion, although opinions may sometimes be actionable when made by experts, fiduciaries, or parties with superior knowledge.

Now let’s discuss mistake. Mutual mistake occurs when both parties share a mistaken belief about a basic assumption on which the contract was made, the mistake has a material effect, and the adversely affected party did not bear the risk.

Unilateral mistake occurs when only one party is mistaken. Relief is harder to obtain, but may be available if enforcement would be unconscionable or the other party knew or had reason to know of the mistake.

The episode should cover misunderstanding, sometimes associated with the famous “Peerless” problem. If both parties attach materially different meanings to a term and neither knows or has reason to know the other’s meaning, there may be no contract. If one party knows or has reason to know the other’s meaning, the innocent party’s meaning may control.

Next, students should learn unconscionability. Unconscionability permits a court to refuse to enforce a contract or clause that is unfairly oppressive. It often has procedural and substantive components.

Procedural unconscionability concerns unfairness in the bargaining process, such as surprise, fine print, lack of meaningful choice, unequal bargaining power, or confusing terms. Substantive unconscionability concerns unfairness in the terms themselves, such as extreme price terms, harsh remedies, or one-sided obligations. The doctrine is often tested in consumer contracts and adhesion contracts.

Illegality and public policy should also be covered. Contracts requiring illegal performance are generally unenforceable.

Contracts may also be unenforceable if they violate public policy, such as certain overly broad noncompetition agreements, agreements interfering with family relationships, or agreements obstructing justice.

The Statute of Frauds deserves special attention. Certain contracts must be evidenced by a writing signed by the party to be charged. Students should learn the classic categories: marriage, contracts that cannot be performed within one year, land contracts, executor promises to pay estate debts personally, goods priced at $500 or more under UCC Article 2, and suretyship promises.

A helpful memory device is MY LEGS: marriage, year, land, executor, goods, surety.

The episode should also explain that if the Statute of Frauds applies and is not satisfied, the contract is generally unenforceable, not necessarily void.

For the UCC sale of goods, the writing must indicate a contract was made, be signed by the party to be charged, and state a quantity. Exceptions include specially manufactured goods, admission in court, payment or delivery and acceptance to that extent, and the merchant confirmation rule.

For land contracts, part performance may satisfy the Statute of Frauds when conduct strongly indicates the existence of the contract, often involving payment, possession, and improvements.

Contract defenses remind us that enforceability is not the same thing as agreement. A deal may contain offer, acceptance, and consideration, and yet the law may refuse enforcement.

Capacity asks whether the party had legal ability to contract, especially where minors or mental incapacity are involved. Duress asks whether assent was induced by an improper threat leaving no reasonable alternative. Undue influence focuses on unfair persuasion of a vulnerable party, often in a relationship of trust, dependence, or domination.

Misrepresentation concerns false assertions of fact that induce assent, with special attention to fraudulent misrepresentation, material misrepresentation, scienter, and the line between fact and opinion. Mistake addresses mistaken assumptions, distinguishing mutual mistake from unilateral mistake. Misunderstanding addresses materially different meanings attached to the same term.

Unconscionability focuses on oppressive unfairness, usually through procedural and substantive components. Illegality and public policy prevent enforcement of agreements the law refuses to support. The Statute of Frauds requires signed writings for MY LEGS categories and has important UCC and land-contract exceptions.

The core takeaway is simple: after formation, always ask whether a defense makes the agreement void, voidable, or unenforceable.